Your retirement plan may allow you to take payouts as a lifetime annuity, which converts your account balance
into guaranteed monthly payments based on your life expectancy.
Do you believe that people like these firefighters from Florida, who are near retirement and have secure pensions
with guaranteed monthly payments, should move their money into riskier assets with no guarantees just before they retire?
Your adviser could then compare that strategy to other options, such as devoting not all but a portion of your nest egg to an immediate annuity, a type of annuity that in return for a lump sum of
cash guarantees monthly payments for the rest of your life.
At first glance, I'd say you probably don't need to put any of your savings into an immediate annuity, a type of investment that converts a lump sum
into guaranteed monthly payments for life.
The premise behind an immediate annuity is simple: You invest a lump sum of money with an insurance company (although you would actually do so through an adviser, a broker or insurance agent) and in return you receive
a guaranteed monthly payment for life regardless of how the financial markets perform.
Even after controlling for total wealth, the security offered by DB plans —
those guaranteed monthly payments until death — lead people to retire 1 - 2 years earlier than they would with 401k plans.
With an immediate annuity, you hand over a sum of money to an insurer in return for
guaranteed monthly payments that start at once and continue for the rest of your life.
The premise behind an immediate annuity is simple: You invest a lump sum of money with an insurance company (although you would actually do so through an adviser, a broker or insurance agent) and in return you receive
a guaranteed monthly payment for life regardless of how the financial markets perform.
Plan participants, therefore, may be forgoing some key benefits, including
a guaranteed monthly payment throughout retirement without bearing market and longevity risk.
You turn over a lump sum to an insurance company in return for
a guaranteed monthly payment for the rest of your life.
You hand over a lump sum to an insurer in return for the insurer's promise to pay
you guaranteed monthly payments for life that start at once (immediate annuity) or at some point in the future (longevity annuity).
It earns interest based on the company's investments and pays the owner
a guaranteed monthly payment at retirement.
I was never told until a month or so ago that because I increased the value of the policy that I could no longer have
a guaranteed monthly payment that would carry the policy for life.